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Life Insurance

Life Insurance cover

Life insurance has the downside of being the only type of insurance cover that you personally won’t benefit from – it only pays out when you die, so the friends or relatives you name as beneficiaries will get the money. This insurance is designed to give you the peace of mind that your family and loved ones will be financially secure after you’re gone.

For the majority of people, life insurance is something that you won’t consider until you apply for a mortgage as most providers insist that you’re insured to cover the loan. However, a mortgage is just one area of your financial commitments and you should consider all monthly outgoings when planning life insurance cover – take into account the cost of running and maintaining the house if you were not around.

There is life cover designed for a range of age groups and circumstances, so any worries that it will cost too much can be allayed and help keep the price to a minimum. Life insurance comes under two different types – those that provide protection only (known as ‘term life insurance’) and those that are also an investment (known as ‘whole of life’ insurance’).
Term life insurance provides cover at a fixed rate of payment for a limited time. When that period has finished the coverage rate you were receiving is no longer guaranteed, so you will either forgo coverage or obtain further coverage – further coverage could have different payments and conditions to your previous rate as well. If you die during the term specified, money will be paid to your beneficiaries.
Whole of life insurance on the other hand remains in force for your whole life and requires premiums to be paid into the policy every month. Some policies also allow a onetime large premium payment to be made as long as a minimal extra payment is made on a regular schedule too. There are even some arrangements that let the policy be paid fully up so no further payments are required.

Life insurance tends to be paid to your beneficiaries as a lump sum however other types of insurance, such as a family income benefit policy, will pay a monthly income instead. It all depends on the type of insurance you choose.

There are other things to consider too. It could make more sense for you and your partner to take out a joint life policy instead of separate life insurance policies. Two of the policies available are a ‘first death’ policy which covers both your lives and pays out on the death of whoever of you is first to go. There is also a ‘last survivor’ policy which pays out on the death of the second of you to die. A joint life policy will be suitable only if you both need to insure for the same amount so it would be ideal for paying off a mortgage in the event of one of you dying, but less suitable as a means of replacing lost income.